South Korea's finance minister said Wednesday that the government will make efforts to reduce increasing labor costs that small businesses would suffer due to the government-led hike in minimum wage.

President Moon Jae-in has pledged to increase the minimum wage to 10,000 won ($8.98) by 2020, as part of his efforts to narrow the income gap and boost private consumption, which may then stimulate the economy.

As a first step, the government earlier decided to raise the minimum wage by 16.4 percent to 7,530 won per hour next year, marking its biggest jump in nearly two decades.

South Korea`s Finance Minister Kim Dong-yeon (L) speaks at a meeting with small business owners and merchants in Yongin on the southern outskirt of Seoul on Nov. 15, 2017. (Yonhap)

Such a sharp increase caused a flush of complaints about rising labor costs from micro business owners and merchants.

Last week, the government announced a set of measures to set aside 3 trillion won to ease the financial load of small-sized firms.

Finance Minister Kim Dong-yeon said the measures are designed to help micro businesses hire more people and stay afloat in the face of higher minimum wage.

"The South Korean economy will be better off when the smaller enterprises do well and give higher salaries to employees," he said in a meeting with these business people. "The government will put more policy efforts to reduce the financial burden."

Meanwhile, the top economic policymaker said the South Korean economy will most likely post an annual growth rate of 3 percent or more in 2017 on the back of increased fiscal spending.

"It is too early to say this, but the economy will likely expand more than 3 percent this year," said Kim. "Even if we experience negative growth in the coming fourth quarter, we will meet the 3 percent growth target."

On Tuesday the International Monetary Fund revised up its growth outlook for Asia's fourth-largest economy this year to 3.2 percent from 3 percent on a strong expansion in investment and improving exports.

The BOK also raised its outlook for the country's GDP last month to 3 percent for 2017, while the finance ministry has retained its target of 3 percent.

"Government spending has contributed to the uptick in the third and fourth quarters," he said. "The government will keep making efforts to help every person feel the warmth of economic growth." (Yonhap)